Egyptian Society of Accountants & Auditors

Law No. 10 of 2009 empowers the Egyptian Financial Services Authority (EFSA) to establish a quality assurance (QA) review system for auditors that are licensed to conduct audits of listed companies and Non-Banking Financial Institutions (NBFIs). The EFSA created the Auditors Oversight Board (AOB), which has been carrying out QA reviews since 2008. As such, the ESAA states it has no responsibility for operating a QA review system and reports to use its best endeavors to promote the best practices of SMO 1 to the EFSA.

EFSA’s QA system incorporates some components of the SMO 1 requirements. Additionally, at the time of this assessment, not all audits are subject to QA reviews (e.g., non-listed company audits). Under proposed amendments to the Accounting Practice Law, the scope of QA reviews would be extended to include all audits. ESAA reports in its 2024 SMO Action Plan that it will continue to encourage the Minister of Finance to expedite the passage of the new law. Meanwhile, ESAA will also continue to promote the need to develop and adopt a QA system for all audits to the Syndicate of Commerce—Accountants and Auditing (SOC)—the other professional accountancy organization in Egypt which is responsible for the regulation of all professional accountants and auditors.

During 2018–2019, an agreement was signed between EFSA and ESAA such that ESAA provides technical support to the AOB through the training of its staff and to the audit firms. ESAA states that it supports its members that are subject to the EFSA’s QA reviews by providing technical support such as checklists, trainings, and disseminating relevant information.

In 2024, ESAA reports that it will complete a review the latest IAASB Handbook to provide recommendations to the Standards Committee on the issuance of revised ESA. Once the updated ESA are issued, ESAA reports that it is organizing workshops for members in 2024 to apply the latest version of ESA, which include ISQM 1 & ISQM 2.

Since 2016, ESAA has reported it is considering a QA review system for its members who perform audits of financial statements for non-listed entities; however, the ESAA would need to modify its by-laws to enforce a mandatory system. Presently, the ESAA ensures member firms and professionals that are eligible to train students are compliant with quality control requirements. Additionally, ESAA does investigate complaints regarding quality. Finally, the ESAA has reported that it is considering the implementation of a voluntary QA program for all firms (not only those which train students) to receive results apart from the EFSA QA review system, but this does has not progressed to date. ESAA will be focusing on advancement of its internal QA system in the coming years.

ESAA is also encouraged to update its Action Plan to reflect the current status of its activities to support its members and the EFSA, including completing the assessment checklist of the SMO 1 requirements (available in Arabic) and sharing it with the EFSA to ensure its procedures meet international best practice. Given the uncertainty on the timeline to adopt the new draft law, the ESAA is encouraged to provide more details and information about its plan to (i) develop a voluntary QA program for its members who perform audits of financial statements for non-PIE entities; and (ii) describe it engagement with SOC on establishing a QA review system to cover all audits. The ESAA should provide clear intended completion dates in its Action Plan.

Current Status: Plan

The Accounting Law No. 133 of 1951 establishes Initial Professional Development (IPD) for all professional accountants and auditors. The main requirement for obtaining a practicing license as a professional accountant or auditor is a bachelor’s degree in accounting and three to five years of practical experience. This allows a candidate to obtain a membership certificate from the Syndicate of Commerce—Accountants and Auditing (SOC) and register in the general register for accountants and auditors, which is maintained by the Ministry of Finance (MoF). A certification process, including a qualifying exam and continuing professional development (CPD) to maintain the certification, is not required.

ESAA is a voluntary membership PAO and as such, is only authorized to set educational and training requirements for its members. Candidates for ESAA membership must satisfy one of the following conditions: (i) have at least three years of full-time work experience in the office of a practicing ESAA member, and complete of the ESAA’s two-part examination; (ii) hold membership in the Institute of Chartered Accountants in England and Wales, or another acceptable foreign professional body (provided they pass the ESAA’s examinations on Egyptian tax law and Egyptian company law); or (iii) hold a doctoral degree in accounting with three years of experience in practice. ESAA reported in 2016 that its IPD and CPD requirements were in line with the IES requirements at the time, and the institute has processes in place to review the requirements on an ongoing basis and update its curriculum as needed.

The institute works to promote the incorporation of the IES requirements to the government and universities. The ESAA notes that several of its members are professors and instructors at Egyptian universities and promote the implementation of the IES. It is also advocating for the incorporation of 2019 IES in the accounting education curriculum in colleges and universities.

In October 2015, the ESAA launched an accountancy academy to provide IPD and CPD professional training for its members. Although not required by law, the ESAA has instituted a mandatory CPD requirement for its members of 120 hours over three years and established a process to monitor compliance with CPD requirements. Non-compliance can result in disciplinary actions. In September 2016, the ESAA and the Association for Chartered Certified Accountants (ACCA) signed a partnership agreement to strengthen ESAA’s CPD programming and knowledge sharing by offering local qualification developments, such as IFRS. From this partnership, ESAA members are exempted from 9 out of 14 papers to pass ACCA exams and gain recognition and certification by ACCA.

The latest IES standards reflect the need for competency-based approaches as well as the increasing demand for accountants skilled in information and communications technologies and place further emphasis on professional skepticism skills and behaviors. These apply to both aspiring and professional accountants. ESAA is encouraged to review the standards and develop plans to incorporate the new requirements and to raise awareness of other stakeholders involved in lifelong development of professional accountants. The association could also drive/facilitate a comprehensive gap analysis of the overall national requirements against the revised IES in cooperation with other stakeholders. The IES Checklist (available in Arabic) and the Accountancy Education E-Tool developed by IFAC may be used to conduct an assessment and to consider available implementation support materials.

Current Status: Execute

ESAA is not authorized to adopt auditing standards in Egypt. The Minister of Investment and International Cooperation (MoI) sets the Egyptian Standards on Auditing Review and Other Assurance Services (ESAROAS), which take into consideration ISA but are currently based on the 2015 version. The ESAA has a Standards Committee that monitors standards and pronouncements issued by the IAASB to propose revisions to the ESAROAS.

In its 2024 SMO Action Plan, ESAA reports that it is in the process of drafting the new ESA to be in alignment with the latest ISA which are expected to be issued in 2024.

To support its members, ESAA states it provides trainings on the ESAROAS on an ongoing basis through its accountancy training center, publishes articles in its magazine on any changes to the ISA, and disseminates new exposure drafts issued by the IAASB.

Efforts to converge with the latest ISA are strongly encouraged as part of enhancing the quality and uniformity of global practice and strengthening public confidence in the global auditing and assurance profession. Therefore, ESAA is encouraged to continue its advocacy for the adoption and application of latest ISA for all mandatory audits in the jurisdiction. The 2022 Handbook is now effective, which includes IAASB’s several new and revised standards.

Current Status: Plan

Ethical requirements in Egypt for all professional accountants are established by the Syndicate of Commerce—Accountants and Auditing (SOC). SOC has issued a Code of Ethics not aligned with the IESBA Code of Ethics, as reported by the World Bank (2002). Professional accountants must adhere to the SOC requirements to be included in the General Register for the Accountants and Auditors, which is maintained by the Ministry of Finance (MoF). Additionally, professional accountants that may be subject to the Egyptian Financial Services Authority (EFSA) oversight through their service provision, must follow the Egyptian Code of Ethics (ECE) issued by EFSA, which, as ESAA indicates, is based on the 2006 IESBA Code of Ethics. The ESAA notes that the EFSA has not updated the ECE to be aligned with the most recent version of the IESBA Code of Ethics. Nevertheless, in its 2024 SMO Action Plan, ESAA reports that it has nearly completed modifying its code of ethics to be in alignment with the latest IESBA Code of Ethics in 2024.

ESAA’s Standards Committee reportedly monitors developments to the IESBA Code, compares the ECE with the revisions to the IESBA Code of Ethics, publish the differences in its magazine, and subsequently, encourages the SOC, MoF, and EFSA to incorporate amendments to the existing Codes.

To support its members that are registered with the EFSA, the ESAA states it maintains the ECE on its website as an online resource and trains and educates members on the requirements of the ECE. ESAA also informs its new members about the possible sanctions in the case of a breach of professional standards, including ethical requirements. In addition, ESAA disseminates information to its members on the IESBA Code of Ethics through its website and magazine.

As a matter of priority, ESAA is strongly encouraged to strengthen its initiatives related to SMO 4 and ethical requirements, which are a cornerstone of the global accountancy profession. Unless legally restricted, the institute should adopt ethical requirements that meet the 2023 Handbook as a self-regulatory requirement for its membership base that joins the ESAA voluntarily. It should also provide further details related to the advocacy efforts it has undertaken to promote the adoption of the latest IESBA Code to the SAE, MoF, and EFSA for application of all professional accountants in Egypt. Finally, to support members, the ESAA could include both the ECE and the IESBA Code of Ethics into its continuing professional development and training programs to support members’ awareness and implementation.

Current Status: Plan

The Ministry of Finance (MoF) is responsible for adopting public sector accounting standards, which at present are cash-basis national accounting standards. The Egyptian Society of Accountants and Auditors (ESAA) reports that there is no timeline or plans to adopt International Public Sector Accounting Standards (IPSAS) in the immediate future but that it works to raise awareness of IPSAS and promote adoption.

ESAA reports that it uses its best efforts to promote adoption of IPSAS but that its role has been limited. Previously, ESAA engaged in regular meetings with the MoF; submitted comments to IPSASB exposure drafts; disseminated information on the updates to the standards; and offered training courses and included IPSAS as topics within its annual conference.

ESAA indicates it will continue to identify opportunities to raise awareness of the standards and engage with regulators. ESAA has stated that if the MoF announces plans to adopt IPSAS, it would support by providing awareness building and technical training on the subject.

Current Status: Sustain

Investigation and Discipline (I&D) requirements in Egypt for all professional accountants and auditors are established by the Syndicate of Commerce—Accountants and Auditing (SOC). SOC has established an I&D system, which, as reported by ESAA is not in line with SMO 6 best practices. In addition, auditors subject to the Egyptian Financial Services Authority (EFSA) oversight, are also subject to I&D mechanisms established by EFSA. The ESAA states that EFSA’s I&D system also does not fully incorporate all the SMO 6 best practices. The ESAA reported meetings in 2014–2015 with SOC and EFSA to advocate for aligning the I&D procedures with international best practices outlined in SMO 6. However, neither organizations’ procedures seem to have been updated.

Meanwhile, the ESAA is authorized to establish an I&D system for its members that voluntarily join the institute and has an Investigation and Discipline Committee, which conducts the I&D procedures and makes a recommendation to ESAA’s board. ESAA states it communicates the consequences of misconduct and non-compliance with professional standards to its members through its website, training courses, and its magazine.

In 2020, the ESAA conducted a self-assessment of its internal I&D system against the SMO 6 requirements and indicated that several areas required improvements, such as, information about the types of misconduct; link with the results of QA reviews done by the EFSA; having non-professional accountants serve on the committee; the limited range of penalties; and results of the I&D procedures are not made publicly available, among others. The ESAA has indicated that it would need to modify its by-laws to align its I&D system with the SMO 6 requirements.

In 2017, a new law was issued concerning associations which required ESAA to modify its by-laws. The ESAA states that it drafted a new range of sanctions that would align its I&D system with SMO 6 best practices and, in 2018, submitted the new by-laws for approval from the Board. As of the date of this assessment, these modifications are still under discussion.

I&D procedures are foundational to maintaining public trust and confidence in the profession. At a minimum, the I&D procedures of IFAC’s member organizations, like the ESAA, should meet the SMO 6 benchmark. ESAA’s system appears to continue to have gaps in this regard, and it is recommended that it invest its resources in strengthening its procedures and subsequently advise and assist the SOC and EFSA with strengthening their mechanisms. Alongside the actions, ESAA should indicate where it needs support from other stakeholders, such as the government, or knowledge sharing from other regional PAOs.

Current Status: Consider

The Ministry of Investment and International Cooperation (MoI) is recognized as the accounting standard-setter in Egypt. In 2019, the MoI issued Decision No. 69/2019 adopting Egyptian Accounting Standards (EAS). As reported in the IFRS Foundation profile, the EAS are close to IFRS Accounting Standards but not identical or as comprehensive. ESAA is not authorized to adopt applicable accounting standards but plays an active role in monitoring differences between the EAS and the IFRS and promoting the need to update the EAS to the MoI. This is the responsibility of the ESAA’s Standards’ Committee which communicates any changes to the IFRS to the MoI to incorporate the changes to the EAS. The EAS were updated in 2019 and 2023 to align with certain updates in IFRS.

To support its members with the implementation of the standards, ESAA provides ongoing trainings on the EAS with emphasis on the new and revised standards and incorporates the standards into its examinations. It also delivers seminars on IFRS implementation and IASB pronouncements and disseminates information through articles in its magazine. Furthermore, the ESAA offers an IFRS Diploma for members and holds preparation courses for members obtaining the Diploma.

Lastly, ESAA mentions that it has submitted comments to an IASB surveys and participates in the international standard-setting process by submitting comments.

Efforts to adopt the latest IFRS for all public interest entities are strongly encouraged to bring transparency, accountability, and efficiency to national, regional, and global markets. As part of its role in supporting adoption, ESAA is encouraged to continue its advocacy efforts with the regulators to promote the adoption of IFRS as the applicable accounting standards for regulated companies. It should also note if it provides implementation support, such as manuals or guides, for its members. The IFRS Foundation has Arabic translations of the IFRS readily available that the institute may consider sharing amongst its members and other stakeholders to support understanding and implementation. The institute could also consider advocating for the adoption of IFRS for SMEs as a permissible framework to bring SME reporting in line with international best practices.

Current Status: Execute